Oil jumps 4 percent as Brexit fears ease, still down on week
Oil prices jumped about 4 percent on Friday, as a weaker dollar and less anxiety about Britain’s possible exit from the European Union encouraged investors to buy riskier assets.
Brent more than recovered the losses of the previous day, when it slid 3.6 percent, yet crude futures still ended the week lower after daily declines from Monday through Thursday.
Brent crude futures’ front-month contract LCOc1 settled up$1.98, or 4.2 percent, at $49.17 a barrel.
The front-month in U.S. crude’s West Texas Intermediate (WTI) futures CLc1 rose $1.77, or 3.8 percent, to settle at $47.98. It fell $1.80 in the previous session.
For the week, Brent was down nearly 3 percent and WTI dropped more than 2 percent.
The dollar fell nearly half a percent on Friday, retreating from its two-week high on Thursday that had weighed on demand for greenback-denominated oil from the holders of the euro and other currencies.
Britain mourned the death of UK member of parliament Jo Cox, a day after the vocal advocate for Britain remaining in the union was murdered. Her death threw the country’s referendum on its EU membership next week into limbo.
Oil prices rose in spite of data showing U.S. energy firms adding oil rigs for a third week in a row, suggesting higher production to come. Oil services firm Baker Hughes reported 9 rig additions this week, the same as the week before and after the 3 rigs in the previous week. [RIG/U]
“People were looking for some trigger to sell the market down and the relatively small rise in oil rigs didn’t provide it, so everyone who was short crude had to rush and cover,” said Scott Shelton, broker at ICAP in Durham, North Carolina.
“Also, volume was lighter than usual, so whatever trades done carried the day for the bulls.”
Volumes for Brent and WTI were just at around 200 million contracts each on Friday, versus the nearly 300 million on Thursday for both, Reuters data showed.
Some analysts said with the UK’s future in the EU still unknown until a vote next Thursday, oil could come under pressure again on fears of a Britain exit, or “Brexit”.
Julian Jessop, chief economist and head of commodities research at Capital Economics, told Reuters Global Oil Forum an U.K. exit could drive Brent to as low as $40.
“It’s mainly Brexit at the moment … before people start to look at the more fundamental oil/commodity drivers again,” Hans van Cleef, senior energy economist at ABN Amro, said.
Source: Reuters
